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SuperRatings   ⟩   News & Insights   ⟩   News   ⟩   Super funds defy global chaos, remain on track for double-digit returns
Kirby Rappell

AuthorKirby Rappell

TitleChief Executive Officer

DateJune 19, 2018

CategoryNews

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With geo-political tensions running hot, Australian super funds have held firm in the face of global uncertainty, delivering a modest positive return in May and remaining on track for double-digit returns for the 2018 financial year.

According to superannuation research house SuperRatings, May return data shows super funds struggled through the month as global events, including an ‘on-again, off-again’ trade war between the United States and China, left markets frustrated.

The median balanced option return was only 0.5% in May, but despite a lacklustre month, the financial year-to-date return is sitting at a respectable 8.4%, putting super funds within striking distance of double-digit returns for 2017-18.

“May was a challenging month for super, with global factors playing a significant role,” said SuperRatings CEO Kirby Rappell. “The ongoing tariff saga between the US and China, along with talks between President Trump and North Korean leader Kim Jong-Un seemed to wrong-foot markets in May, and super funds were not immune from the uncertainty.”

“But despite May’s disappointing performance, super members should expect a very solid innings from super come 30 June. We need to see an average return of around 1.5% in June for balanced funds to record a double-digit gain for the financial year, which is entirely possible.”

Interim results only. Median Balanced Option refers to ‘Balanced’ options with exposure to growth style assets of between 60% and 76%. Approximately 60% to 70% of Australians in our major funds are invested in their fund’s default investment option, which in most cases is the balanced investment option. Returns are net of investment fees, tax and implicit asset-based administration fees.

Members in growth option funds fared much the same, with the median growth option growing at virtually the same pace in May. Investors with full exposure to Australian shares enjoyed a return of 1.1%, while those with predominately global share exposure were the laggards, with a median return of only 0.4%.

Over the last ten years the median balanced option has returned 5.9% per annum with an account balance of $100,000 in 2008 now worth $181,169. Interestingly, over the past 10 years to May 2018, the difference between balanced and growth option returns has been relatively small, with a balance of $100,000 accumulating to $184,299 for the median growth option. While the growth option is susceptible to higher drawdown risk when markets move down, over a 10-year period it has come out slightly ahead.

Value of $100,000 invested over ten years to 31 May 2018*

Select index

Source: SuperRatings

*Interim results only

Source: SuperRatings

*Interim results only

While super funds on average have an enviable track record, picking the right fund can make a big difference to retirement outcomes. As the below chart shows, the best performing balanced option has grown to $203,150, compared to the worst performing fund, which has grown to only $145,196 over the decade—a difference of $57,954.

Growth in $100,000 invested over 10 years to 31 May 2018*

Source: SuperRatings

*Return over 10 years to 31 May 2018. Includes public offer funds only

The tables below show the top 10 performing balanced and growth funds over the past 10 years to the end of April 2018. This is a good starting point for evaluating your fund’s performance, but there are a number of things to consider when deciding if your current fund is right for you. Fees and performance track record are important, but so are things like insurance, governance, and the member servicing environment, all of which can determine how well off you are in retirement.

Source: SuperRatings

*Return over 10 years to 30 April 2018. Includes public offer funds only

Source: SuperRatings

*Return over 10 years to 30 April 2018. Includes public offer funds only

Release ends

Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to “General Advice” (as defined in the Corporations Act 2001(Cth)) and based solely on consideration of the merits of the superannuation or pension financial product(s) alone, without taking into account the objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If SuperRatings advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Product Disclosure Statement for each superannuation or pension financial product before making any decision about whether to acquire a financial product. SuperRatings research process relies upon the participation of the superannuation fund or product issuer(s). Should the superannuation fund or product issuer(s) no longer be an active participant in SuperRatings research process, SuperRatings reserves the right to withdraw the rating and document at any time and discontinue future coverage of the superannuation and pension financial product(s). Copyright © 2018 SuperRatings Pty Ltd (ABN 95 100 192 283 AFSL No. 311880 (SuperRatings)). This media release is subject to the copyright of SuperRatings. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth.), no part of this media release may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of SuperRatings. This media release may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to SuperRatings copyrighted material, applies to such third party content.

For more information contact:

Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au

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